Introductory Price as a Signal of Cost in a Model of Repeat Business.

This paper analyzes a bargaining model with incomplete information in which the time between offers is an endogenous stra tegic variable. It finds equilibria involving a delay to agreement th at is attributable to the use of strategic time delay by bargainers t o signal their relative strength. Under some specifications of the pa rameters, delay is present in the unique sequential equilibrium whose beliefs satisfy one intuitive restriction. This delay does not vanis h as the minimal time between offers becomes small. Copyright 1987 by The Review of Economic Studies Limited.